Central government employees currently enrolled under the National Pension System (NPS) have just a few days left to decide whether they want to shift to the Unified Pension Scheme (UPS). The deadline for making the switch is September 30, 2025.

Unlike NPS, which is market-linked and offers variable returns, UPS promises a guaranteed pension after retirement. The government had issued its official notification for UPS on January 24, 2025, and since June, several important modifications have been introduced to make the scheme more attractive for employees.

Before finalizing the switch, government staff must carefully understand the new provisions, benefits, and conditions associated with UPS.

Option to Return to NPS Once

One of the most notable features is that employees who opt for UPS but later find it unsuitable will be allowed to return to NPS. However, this facility is available only once during their service period. After exercising this option, employees will not be able to switch again.

Submission of Physical Forms Permitted

On September 24, 2025, the interim regulator, Pension Fund Regulatory and Development Authority (PFRDA), allowed government employees posted on deputation to organizations outside UPS coverage or serving in foreign assignments to submit physical forms. This move ensures that such employees are not left out due to procedural barriers.

Tax Benefits Under UPS

UPS subscribers are set to receive significant income tax exemptions. According to the Income Tax Act 2025, the lump-sum amount received at the time of retirement under UPS will be completely tax-free. This reduces the financial burden on retirees while ensuring a steady pension income.

Benefits Even in Pending Cases

A major advantage of UPS is that employees facing pending departmental or judicial proceedings at the time of retirement will still be eligible to receive pension benefits. Earlier, such circumstances often led to a suspension of pension and related entitlements. The new rule provides clarity and protects employees from prolonged uncertainty.

Security in Case of Death or Disability

In cases where an employee dies during service or becomes disabled, UPS ensures financial security for their family. The benefits will be provided as per the CCS (Pension) Rules or relevant PFRDA regulations. This provision gives assurance to families that they will be supported during difficult times.

Pension on Voluntary Retirement (VRS)

Employees who complete at least 20 years of qualifying service and choose voluntary retirement (VRS) will be eligible for pro-rata pension benefits under UPS. This feature supports workers who want to exit government service early while still securing a reliable post-retirement income.

Gratuity Benefits Enhanced

UPS also covers retirement gratuity and death gratuity. This means that upon retirement or in the event of the employee’s death, a lump-sum payment will be provided to the individual or their family members, offering added financial support.

Why Employees Must Consider Carefully

The UPS offers certainty with a guaranteed pension, tax benefits, and added security in cases of disability, death, or ongoing legal matters. At the same time, NPS provides market-linked returns that could potentially generate higher payouts but come with risk.

For government employees nearing retirement, UPS may provide stability and assurance, while younger employees may want to weigh the flexibility and growth potential of NPS.

With the September 30 deadline approaching fast, employees must assess their retirement goals, financial needs, and risk appetite before making the switch.